Fletcher Building has raised its FY26 EBIT guidance to $400m-$403m, buoyed by stronger volumes across key divisions and a $52m boost from property sales. However, caution remains over potential project delays and cost inflation impacting early FY27 performance.
- FY26 EBIT guidance increased by ~6.4% to $400m-$403m
- Property sales contribute ~$52m to EBIT
- Light Building Products and Distribution volumes improved notably
- Heavy Building Materials volumes mixed with some units below prior year
- Input cost inflation and project delays pose risks for FY27
Stronger Volumes and Property Sales Drive EBIT Upgrade
Fletcher Building (NZX:FBU) has nudged up its FY26 EBIT guidance to a range of $400 million to $403 million, reflecting a roughly 6.4% increase from earlier forecasts. This revision factors in approximately $52 million of earnings from surplus property sales, notably the Laminex Cheltenham site in Australia. Excluding these property gains, continuing operations are expected to deliver EBIT between $348 million and $351 million, marking a 3.6% improvement from mid-June guidance.
Volume Growth Led by Light Building Products and Distribution
The volume uptick was driven primarily by Fletcher Building's Light Building Products and Distribution divisions. The Light Building Materials segment benefited from favourable raw material procurement, improved manufacturing efficiencies, and increased use of low-cost scrap. Demand also surged ahead of planned price increases, with Iplex businesses in both New Zealand and Australia seeing accelerated customer purchases. Meanwhile, the Distribution division's PlaceMakers Frame & Truss volumes rose by 5.4% quarter-on-quarter and 12.8% year-on-year, supported by the newly operational Cavendish Drive site in Auckland.
Mixed Performance in Heavy Building Materials Amid Uneven Recovery
The Heavy Building Materials division posted a more varied performance. While volumes improved compared to the previous quarter, several key units remained flat or declined relative to the prior corresponding period. For example, Winstone Aggregates volumes grew 2.3% quarter-on-quarter but were still 5.4% below the previous year, reflecting a gradual recovery from a subdued first half. Humes volumes increased 4.3% on the prior quarter but fell 2.4% year-on-year, while Golden Bay and Firth Ready Mix volumes were broadly stable.
Construction Activity Supports Demand but Risks Loom for FY27
Ongoing construction projects continue to underpin demand for Fletcher Building’s materials. However, the company flagged that macroeconomic uncertainty and inflationary pressures on input costs are causing delays and cancellations, particularly in the commercial construction sector. Should these trends persist, they could weigh on performance in the first half of FY27. Residential volumes also showed signs of softening, with 220 residential and apartment units taken to profit in Q4 FY26, down from 247 in the prior corresponding period and 536 units for the full year versus 666 in FY25.
Transition Away from Significant Items and IFRS 18 Adoption
This will be the final reporting period in which Fletcher Building uses the Significant Items classification for expenses, as the company plans to early adopt IFRS 18 compliant income statement standards in FY27. The $9 million in costs related to the Laminex Cheltenham site exit will be classified as Significant Items for FY26, consistent with past treatment.
Bottom Line?
While FY26 wraps on a stronger note, Fletcher Building faces a delicate balancing act managing cost pressures and project uncertainties that could test momentum early next year.
Questions in the middle?
- Will input cost inflation continue to disrupt new project starts in FY27?
- How will the early adoption of IFRS 18 affect Fletcher Building's future earnings transparency?
- Can volume growth in Light Building Products and Distribution offset Heavy Materials’ mixed results going forward?